RBS cuts rates as Funding for Lending scheme kicks in

16 July 2012 | By Samuel Dale

The Royal Bank of Scotland is using the Bank of England’s funding for lending scheme to cut mortgage rates for first-time buyers and landlords.

Details of the Bank scheme were unveiled earlier this week with the aim of providing banks with up to £80bn of cheap loans to pass on to customers in the form of business loans and mortgages.

In response RBS is cutting rates on a direct-only fee-free five-year fixed rate deal at 90 per cent LTV from 6.49 per cent to 4.79 per cent which is also available at 95 per cent LTV using the government’s NewBuy scheme at the same rate as previously.

The bank is also launching a 3.49 per cent two-year fixed or tracker buy-to-let deal at 60 per cent LTV that is available through brokers.

However, while welcoming the scheme RBS also warns that lower rates will help but may not boost first-time buyer numbers due to underlying problems of demand and economic uncertainty.

RBS consumer economist Fionnuala Earley says the funding for lending scheme should help first-time buyers in principle.

But she says: “The issue is still that it is quite expensive for first-time buyers to get into the market and it’s not just because of mortgage rates and how much income it takes up. It is also about the deposit needed and the uncertainty they feel about what’s happening to the market now.

“It is a step in the right direction but there are still a few obstacles in the way. If we can get first-time buyers back into the market then the multiplier effect they have can get the market moving.”

Earley says that demand is weak and it is not just down to deposits but high inflation and squeezed incomes across the UK.

HSBC has already ruled itself out of using the Funding for Lending scheme preferring to use deposits to fund its mortgages.

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Readers' comments (6)

Anonymous | 16 Jul 2012 3:29 pm
RBS pricing is extraordinary. From 6.49 to 4.79 on the back of lending scheme. Why not price via intermediaries and meet target at same time.
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Anonymous | 16 Jul 2012 5:47 pm
I believe this money is there to help RBS sales (and banks) once more -

The banks branches get all the low interest rates on the high loan to value schemes (since they are trying to get all the new first time buyers and new business with this money ) while the intermedaries get a lower interest rate at the 60% loan to value deals to try and then balance the banks average loan to value on there mortgage books.

I for one will not be helping them by using them especially since there are other competitive rates at 60% ltv elsewhere

All this money does is allow the banks to boost there business at the branches more while cutting out the intermediary further - what ever happened to a level playing field and competition- sorry I forgot those days have gone

If intermediaries were able to offer the same direct rates offered to banks branch networks the banks would loose a lot of its business since most clients are prepared to pay a broker fee for good service.

The government should look how banks are using the funding for lending money before throwing more monety there way - I would prefer it if this money went to the smaller building societies since it would be used more wisely.Unfortunately it is a lot harder for them to qualify for this money

Soon there will be just the banks lending with no competition for their business from intermediaries or smaller societies

We can compete easily on the service level but when the interest rate differential becomes so great between the direct deals the banks offerto their branch network and those they offer to the intermediary market then something is wrong

Even if they offered brokers access to the direct deal and did not pay us a broker fee for processing it I for one would use it as my clients are prepared to pay a broker fee for the service.

Can the government not stipulate that the banks must offer products using this Funding for Lending Money to intermediaries at the same interest rates it offers it to its branch networks?

This would then boost lending to FTB and new businesses and competition which is what it is trying to create

I thought this RBS lending is what the goverment was trying to get away from where banks are too powerfull with no competition - please act now before its to late
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GARY | 17 Jul 2012 1:47 pm
Direct only...What a joke.
As far as i'm concerned RBS are a lender I no longer use, and will continue not to use.
They were a nasty lender when I worked for them & they don't seem to change.
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colin | 18 Jul 2012 12:53 pm
the typical comment from lenders about the need to get first time buyers help..........but rather than get it out there to brokers who are best placed to help these FTB's they keep it under wraps for branches/direct.......

“It is a step in the right direction but there are still a few obstacles in the way. If we can get first-time buyers back into the market then the multiplier effect they have can get the market moving.”
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Anonymous | 19 Jul 2012 1:32 pm
RBS are a joke as far as I am concerned. They do not give a damn about the broker community and I like Gary see them as a lender of last resort. It is about time all of the networks got together and made a stand before they have no members left to stand up for.
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colin | 19 Jul 2012 2:34 pm
i raised this with my RBS/NW contact.......the response was if we stuck this out to brokers our service would fall over as we would get inundated with applications!!!!!!!!

So yet further evidence that the branch networks are unable to drive any volume.

So all this talk about helping FTB is lip service.
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